Good morning, everybody. Ladies and gentlemen, it is my pleasure to welcome you to the Lindt & Sprüngli Teleconference we are holding on the occasion of half year results 2019. During the presentation, I will give some additional comments to the charts that were uploaded this morning to our website. I'll guide you through the slides by webcast to result. Presentation will take approximate 20 minutes. Following the presentation, I will hand over to the operator, who then will organize the question-and-answer session.

With regards to the agenda, we will talk about performance highlights of the first half 2019. Then I will go more into the on detail on the P&L and the balance sheet details for the first half, and then I will give you a short outlook as well for 2019. And then we will do the Q&A.

So let's move on to the performance highlights. Starting with the P&L statement. We go first into the overview of the results. Organic growth for the whole group reached 6.2%. As the Swiss franc strengthened mainly against the Euro and Pound Sterling, we achieved 5.4% growth in Swiss francs. Organic growth of 6.2% is in line with our 2019 full year guidance of 5% to 7% revenue growth.

Growth in NAFTA is at 7.2% after 6 months, which is above our guidance of around 4% growth in that region. I will talk about this later. Europe is growing by 5% and Rest of the World between 8% and 9%, which both are on target.

We are pleased to deliver again good profit figures that are in line with our guidance. EBITDA is growing by 24.4% to an EBITDA margin of 14.4%. This is partially driven by the impact of the new IFRS 16 leasing standard and the higher depreciation of just below CHF 40 million coming from the new accounting standard. Excluding this impact, EBITDA margin is at about 12.3%. EBIT has grown positive revenue also and EBIT margin is now at 7.2% in the first semester, 20 basis points above 2018.

Net income increased by 2.4%, and net income margin decreased slightly to 5%. The driver of this decrease is also IFRS 16 accounting change and excluding the accounting change, net income margin is at 5.3%, which is 20 basis points above last year. As in previous periods, the EBIT figure shown is being charged by noncash flow amortization of CHF 4 million for the first half, which is CHF 8 million for the full year, related with the Russell Stover transaction. The set of figures on sales and profitability shows that despite the challenging markets, trade and consumer environment, the trend to premium chocolate is confirmed and continues.

Before talking about the balance sheet, we should bear in mind that the IFRS change has led to additional assets and liabilities of CHF 516 million booked on January 1, 2019. Therefore, we are showing the numbers compared to January 1, 2019, or December 2018. The reduction of the total balance sheet between January 1 and June 30 is mainly driven by the share buyback. The repurchased shares for about CHF 330 million in 2019, which brings us to about CHF 455 million for the overall share buyback program. Equity is also shown versus dates January 2019 compared to December 2018. The equity ratio is dropping by about 4 percentage points, driven by the increase of the balance sheet total by the IFRS change. The reduction of the equity in 2019 is also related to share buyback program. The equity ratio is now at 57.3%. And as you can see, we continue to have a very strong balance sheet.

The net debt position is also impacted by the IFRS change and had to be restated by CHF 516 million in January. At the end of June 2019, we are now at CHF 781 million net debt, which is CHF 250 million higher than in January, which is also coming from the share buyback. Excluding the IFRS change, net debt would be at around CHF 260 million.

Now going more into the details on the sales. So for sure one of the biggest topics for you is the good development of organic growth. Total group reached a very good 6.2% in the first half. This development has to be seen considering the following facts. First, the chocolate markets on a worldwide basis are recovering slightly and show some positive momentum. It was -- we had a tough trading environment, again, considering the chocolate industry could benefit from lower raw material costs in recent years, leading to price pressure in some markets. And thirdly, we have still cautious consumers in some markets in light of volatile economic and political environment.

Good news is that on a global basis, the premium chocolate category was, again, clearly outperforming the total chocolate market for the total market growth. In the last year's key topic in discussions with investors and brokers has been Russell Stover. The organic growth of 6.2% implies an improved performance of Russell Stover. Sales at Russell Stover were positive in the first 6 months, fully on track to achieve our full year expectations. Also the other 2 U.S. companies, Lindt and Ghirardelli had a good performance in the first semester, and both have grown faster than the market. I'll give you some more details later in the presentation.

So let's move to the sales analysis in Swiss francs for the last 5 years. So we are presenting here that Swiss franc growth and sales over the last 5 years and absolute and gross figures include Russell Stover for 2015. In many years in the past, Swiss franc growth has been negatively impacted by the strengthening of the home currency. In the first half of 2019, this has been the case, again due to the weak euro and the weaker Pound Sterling. Overall, the negative impact has been 80 basis points.

Looking at the sales speak by markets, I would like to highlight the process -- the progress made in North America, reaching 35.5% in total sales in the first half of 2019. Another important pillar, Germany is reaching 16.7%. The U.K. getting to 6.3%. Rest of the World is at about 15%, thanks to the excellent contributions mainly from the new markets, Japan, China and Brazil. We should bear in mind that as these numbers are shown in Swiss francs, this has also an impact. Details of the drivers of sales growth are shown in the following chart. As a whole group, the volume went up by 5.6%. And on top, the price mix effect was 0.6%, reaching the organic performance of 6.2%. As we have already seen, ForEx has a negative impact of 0.8 percentage points, reaching the 5.4% growth in Swiss francs. The positive impact from price is mainly coming from the U.S., where we have successfully implemented price increases at Ghirardelli and Lindt.

Now moving into the sales analysis by segment. Organic sales growth by geographical segment shows a continued good growth in Europe at 5%. This was also 5.0% in the first half of 2018, so we are at the same level in terms of growth. We had a very good performance in important markets like Germany, the United Kingdom, Austria and Scandinavia. In the Eastern European markets, Russia, Poland, Czech Republic, Slovakia and Hungary, we even grew double digit. In all markets, we benefited from the late Easter season, leading an additional boost in sales in the first quarter. North America is growing by 7.2%, with Lindt U.S., Ghirardelli and Russell Stover, all showing a very positive first semester. When looking at the performance in the U.S., it has to be taken into account that the U.S. chocolate market growth as a whole slowed down over the last years. Also the trading landscape has come under some pressure with some channels suffering from the increase in e-commerce.

As mentioned before, in this difficult environment, the Lindt, Ghirardelli and Russell Stover brands are outpacing the markets creating some positive momentum. The sales at Russell Stover were positive in the first 6 months and fully on track to achieve our full year expectations, which is flat to slightly positive. We have seen a very positive sales momentum with the Russell Stover sugar-free range, with stevia extract as a sweetener. Also the relaunch of the Russell Stover box chocolate Bowline, which is the core business for Russell Stover has been a success so far. Also Russell Stover has clearly benefited from the later Easter in 2019. Overall, we think we are taking the right strategic steps at Russell Stover to be set up for future success. This process has been taking longer than originally planned, but we are on the right track. What's more, we have started various projects in the U.S. to gain further leverage from the Russell Stover acquisition, mainly in the areas of merchandising, logistics, procurement and IT. We expect bottom line benefits from those projects in the next years, which in part can be reinvested in the brands. Benefits should start to kick in from 2020. In 2019, we have still headwinds from the high logistics cost in the U.S. For the second half, I expect a slowdown in the U.S. as we won't benefit from the later Easter as we did in the first half.

In the segment, Rest of the world, we have also grown faster than the markets and above group average getting to 8.3% growth compared to 8.4% growth in the first half of 2018. Growth is coming from basically all countries within this segment. It is great to see that the new markets, Japan, China and Brazil have grown double digit. Including this segment is also the distributor business, where we sell to a big number of third parties, distributing our products in smaller countries. Overall, all segments are on track to achieve the full year targets, which we communicated also in March, so Europe should grow for the full year between 5% and 6%; North America, between 4% and 5% and Rest of the World, between 8% and 10%. This guidance by segment is basically unchanged after the first semester with a slight upwards revision of North America.

After having given you an overview of sales. Let's move on now and talk about the very important topic, costs, by going through the different cost categories. We start with material costs. So material costs, adjusted by the change in inventory came in at 32.0%, 150 basis points lower than in the previous year and 180 basis points below 2017. The main reasons for the decline are benefits from decreases in cocoa bean price, lower cocoa butter prices and partially offset by higher packaging material costs. We have achieved this good result by hedging cocoa bean futures quite far out when prices were low last year. One big question for the next 12 months remains the development of the cocoa market. The market expects for the harvest season 2018, a surplus of around 50,000 to 100,000 tons, and the deficit of about 100,000 tons for the 2019-2020 crop. The possible deficit in the coming harvest is the reason that we have seen an increase in cocoa futures prices over the last few months. The future outlook heavily depends also on the positioning of the speculative market participants who have quite a lot of influence on the cocoa market. Also from the 2020-2021 crop, Ghana and Ivory Coast have implemented a living income differential of $400 per ton, which most likely will make cocoa beans more expensive at the latest from the 2020-2021 crop. For those of you who are interested in the details, cocoa bean future prices in London are currently trading between GBP 1,800 and GBP 1,900 per ton and the cocoa butter ratio has more or less stabilized at the still high level of 2.65. This compares with a ratio of above 2.80 and cocoa bean prices of around 1,700 to 1,800, 1 year ago.

Moving on to personnel expenses. We see a decrease of 20 basis points. We had efficiency gains driven by our Global Lean program in the factories, combined with benefits from the combined merchandising force in the U.S. This was partly offset by the continued successful rollout of our retail concept and double-digit growth in this segment. The retail concept is labor-intensive and means pressure on this cost element.

So moving to the operating expenses, the new IFRS 16 rules for leasing have a positive impact on the cost category operating expenses as lease expenses of around CHF 40 million have been taken out and been replaced by higher depreciation related to the capitalized right-of-use assets. Excluding this change, the expense ratio would be just below 30%. Based on the above, the operating expense ratio goes slightly up driven by 2 factors. One, the logistics market in the U.S. has been inflationary over the last 24 months, driven by a shortage of truck drivers. Also our new warehouse infrastructure had initial one-off costs in 2018 and to some extent, also in 2019. We will see cost benefits in logistics in the next years coming from the shared network in the U.S. On the other hand, marketing investments remain at a high level. Similar to last year, we are able to reinvest some of the funds coming from lower material costs in advertising and other brand-building activities.

Moving to the depreciation, amortization and impairment, also in this, cost category has an impact of just below CHF 40 million due to IFRS 16. Excluding the accounting change, depreciation will be at around CHF 90 million. The key driver for the increase in recent years is our high CapEx program to satisfy our volume growth. One main investment is in our Lindt factory in the U.S. in Stratham, New Hampshire is the goal to be ready in the next years to absorb the increasing volume and gain of market share in the U.S. Total CapEx in that factory is planned to be above CHF 200 million in the next 3 to 4 years.

Moving to the operating profit EBIT, which increased by 7.8% versus previous year, reaching CHF 126 million or 7.2% of sales, which is 20 basis points above 2018. The EBIT figure includes a recurring amortization charge of CHF 4 million for the first half, which is the CHF 8 million, which I mentioned before for the full year related to the amortization of activated customer relations of Russell Stover under the rules of IFRS 3. So net income, the 2 line items between EBIT and net income had the following development. First, the net financial expense came in at CHF 14.7 million, which is an increase versus last year, mainly due to the higher interest expenses driven by the IFRS change, but also higher hedge costs for the subsidiary financing as well as the negative interest rate environment in Switzerland. Secondly, the tax rate decreased versus last year by 100 -- or 1.5 percentage points to 21.0%, thanks to further tax optimization.

Based on the current outlook, we consider the rate of 21% to 22% as sustainable, still depending on the tax law changes implemented in the Canton of Zurich in Switzerland. The absolute level of net income is CHF 88 million, an increase of 2.4% versus 2018 and a 20 basis -- a 10 basis point margin decrease over last year. This decrease is driven by the IFRS change and the front-loading effect, in other words, we have to book the higher interest expense in the beginning of the lease commitment. This impact will smoothen out over the next years. Net income, excluding the change of IFRS would be around CHF 4 million higher or 5.3% of sales, which is 20 basis points above last year.

Talking about CapEx now. CapEx is at CHF 100 million, which is slightly below expectations and lower than last year. We still expect CapEx to reach around CHF 250 million for the full year, which is at the same level as in 2018. As always communicated, we will see increased CapEx in the next 3 to 4 years due to the U.S. capacity expansion in Stratham, New Hampshire. It is difficult to predict the exact timing of the CapEx flows due to the timing of the project.

So quite a busy chart on net financial position. The bridge shown on this chart is giving details of the main cash relevant developments. We also showed the impact of IFRS 16 in this chart, it has the negative impact of CHF 516 million on the net debt. Net debt is now at CHF 780 million, but excluding the IFRS impact, as I said before, net debt would be at around CHF 260 million. Given our net debt position, we pay high attention to the [lead] cash generation to reduce the absolute debt level. Net debt increased by around CHF 250 million due to the share buyback program where we spent around CHF 330 million this year. We returned, in total, CHF 573 million to the shareholder in the first 6 months. On the other hand, we had positive free cash flow of around CHF 300 million. Given today's outlook, net debt will land at the year-end at around CHF 600 million, excluding the lease accounting, this outlook would be at roughly CHF 100 million net debt on a pure cash basis.

So moving to the outlook 2019. So we confirm our mid- to long-term growth goal of organic sales growth target of 5% to 7%, combined with an average increase in EBIT of 20 to 40 basis points. For 2019 financial year, we expect organic sales growth to be in line with those targets. And as I mentioned, what is important, the guidance per segment. For the top line, Europe, 5% to 6%, North America, 4% to 5%, Rest of the World, 8% to 10%. And with this, I come to the end of my presentation and hand over to the operator to start and lead the question-and-answer session.

I would like to have maybe 2 questions. The first one is that in the profits development in North America, if you can share with us how much was the impact of the investments in logistics, and maybe the growth between Canada and in the U.S.? And the second one, is on Switzerland, and it looks from your results, that it was a very good growth in Switzerland from roughly mid-single digits, which is kind of a very strong acceleration versus the previous years. If you can put some color on that.

Okay. Yes. Jean-Phillippe, thanks for the question. So second question, Switzerland. Yes, that's correct, your assumption around mid-single digit. And then moving to North America. Starting with your questions about the growth in Canada, I think, or well, you asked about the growth in the U.S. and Canada...

So in the U.S., we grew actually slightly faster in North America on average. And in Canada, slightly less. So definitely the U.S. was driving the growth of 7.2%. And then you asked about logistics cost, the one-off impact, we don't publish that.

I also have a question regarding North America, this 7.2%. You're guiding now at 4% to 5%. Could you give us a little bit more color. I mean you have mentioned later Easter, but still it seems to me like quite a prudent estimate of [7.2] % because the price/mix effect, I guess, will be a little bit more pronounced in H2 for North America. Then second question, on the Rest of the World, you just have decreased slightly your guidance to 8% to 10%. What was the reason here for it? Was it Australia? And again, on the IFRS 16 impact, did I get this right, in H1, it was CHF 4 million. So for the full year, we should expect CHF 8 million negative impact on the net profit line? And what will be the impact here on the EBIT line for the full year from IFRS 16? And last question, for the material costs, you had the benefit of 150 basis points for -- in H1, what is your best guess here for the full year?

Yes. Sorry, yes, I was on mute, I didn't realize. So I start with material costs. So material costs, I expect to be roughly at the same level as last year, maybe slightly better, but I would assume roughly at the same level as last year for the full year material costs.

No, for the -- I'm saying for the full year, the percent of sales would be slightly better to the same level as last year, right? So for the second half, it will be higher than what it is, is that your question?

Correct, so that was your question about material costs. And the driver, of course, you have cocoa bean prices, which you can see are going up and of course, when you look at the trend of the curve. And if you think about hedging. Obviously, the longer articles, the more the trend is rather up and down, right? But for the full year, I think we will have a very good result in material costs, because we have been able to really hedge early, and we hedged relatively out really far out and that's positive from that viewpoint. Then probably moving to the IFRS 16 question that was about the impact on EBIT for the full year, which we expect to be around -- around 10 basis points roughly.

Right. Yes. Rest of the world, your question, 8% to 10%, why we took it slightly down. One big market in Rest of the World is Australia, for sure. We are really outperforming in the markets I mentioned, double-digit in Japan, Brazil and China, which are the focus markets. Australia, which is still a bigger share of that market is growing low to mid-single digits, more or less. And that's why I'm saying 8% to 10% versus the 9% to 11%, which we said in March. Yes, because the 11% is probably a tough one, right? So that's why I'm saying 8% to 10%. But on the other side, I'm saying U.S., 4% to 5% and there you're saying, okay, it's -- you're surprised that it's for more after the 7.2%. For sure, the 7.2%, has -- we had some benefit from the Easter -- Easter channel. Sorry, from the Easter -- from the late Easter, we had some positive impact there.

And then for the second half, we will not have that positive impact, so it will be kind of the smoothened out sales, the normal trend. And in some channels, we have also some -- some challenges to like Rite Aid, for example, the drug channel Rite Aid, we are not sure about their financial health. Will they into Chapter 11? Many people think they will, and we are careful there and we still have certain exposure in that channel, which is one of the 3 big -- still big drug channel customers in the U.S.

So that's why I think, number one, we will not have to see positive impact from Easter. Number two, in some channels, there are challenges. But there are also positives, of course, we are very -- we had a promising start with the Bowline with Russell Stover and also with Lindt and Ghirardelli who are growing fast in the market. But I would now not assume that for the second half, we will continue this 7% growth. For the full year, I expect 4% to 5% in North America.

Would be a little bit higher, yes, in the U.S. because we implemented the price increases in the first quarter and not for Easter. Of course, it was too late for Easter, so it's for the everyday products and for Christmas. That's why it could be a little bit higher in the second half prices. And then we have to see what the impact is on volumes as well, right because of price increase. That's always difficult to predict. We have seen now some competitors have implemented price increases also like Mars who announced price increases -- further price increase. So look, it's quite an environment, that is quite dynamic, so I would definitely not expect the second half to grow 7.2% in North America. That's why, for me, 4% to 5% is the most likely scenario. Okay. See you on Friday. Thank you.

Alain Oberhuber, MainFirst. Congratulations for the strong organic growth. A question regarding the U.S., so several questions about that. Could you give us a pecking order regarding the 3 brands, which grew fastest and what we could expect in the second half of these 3 brands also in the pecking order, please? The second question is regarding the impact of Valentine's Day, how was it this year? And also into that, why are you this conservative for Russell Stover for the second half? Now the second question is regarding the butter ratio. Could you give us your view on the butter ratio because it looks like that it's currently stable on a low level.

And the last question is regarding the store openings. How many store openings did you have on a group-wide level? And I guess the store opening is included in organic growth. Did you carve-out what was the organic growth excluding the store openings.

Okay. Thank you for the questions. First, on -- about U.S., you asked about the pecking order of growth. So the 3 U.S. brands, they all grew about the same in the first half. So no massive differences there in terms of the percent growth between the 3. Your second question was about Valentine's Day, I didn't totally understand what you meant. I assume if you expect the Valentine's Day to be successful in 2020 as in 2019, if we expect a similar trend. In general, we had good sell-throughs in Valentine's 2019. So we expect to gain, let's say, a growth in Valentine's for next year, which will be similar as last year. As you probably are aware, most of Valentine's Day is shipped from us to the customer in quarter 4. Then the sellout, of course, is in quarter 1. But yes, that's a big question mark now. We don't know yet. We will get the orders in the next few months. It's a bit early days to give a clear view on Valentine's, but overall, we think we have a good lineup in Valentine's.

It's important for all the 3 brands, especially important for Russell Stover with the clear market leader on Valentine's Day in the U.S. So that was about the U.S. questions. Then you asked about the butter ratio, what is the forecast on the butter ratio. That's always a challenging one. Had you asked me 4 weeks ago, I was probably more on the bearish side on the butter ratio. If you ask me now, I am probably more on the bullish side on the butter ratio because of this change of living income differential in Ivory Coast and Ghana. We should bear in mind that Ivory Coast and Ghana produce about 2/3 of the cocoa in the world. After increasing their price basically by USD 400 per ton, And if you take it as a percent, the market is in U.S. dollars at about USD 2,500, USD 2,600, so that's about 15% increase, just coming from that living income differential. And of course, it will also have an impact on the other origins, so that has also already driven the butter ratio market slightly up.

So I'm more on the bullish side here, depending on what we see now on the regular differentials in those markets. But I definitely think it's certain risk that we will see higher butter ratio.

And then your last question was about store openings. For the full year, we expect to open about 25 stores net, 25 new stores net. So we land at 485 stores in total at the end of the year, roughly. And no, we did not carve it up for organic growth, but we have a positive comp store growth in our existing stores.

Just coming back regarding Russell Stover. Why are you so negative then for the second half if all 3 of these brands grew nicely of [inland] in H1. Do you expect that a stronger deceleration of Russell Stover than with the other 2 brands?

Look, if we achieve 4% to 5% growth, you should bear in mind that the second half is much bigger than the first half, right? So to get to 4% to 5%, it's still a challenging one and we have still to grow very positively in the second half, right? You shouldn't forget that. So I wouldn't say we are negative. I just think we are realistic, and we -- that's currently our best estimate. I think the business is going well. And as I said, you have to carve-out in the first half, the late Easter. If you carve it out, you're not at 7.2% in North America. That's important to bear in mind to be lower. And yes, so that's why we have to be realistic, so 4% to 5% is our best estimate. And as you probably have seen in the last years, we normally were quite good in forecasting the Russell Stover and Lindt and Ghirardelli business in the U.S. in the last 2 years or so. So yes, I expect 4% to 5% growth overall.

It's Warren Ackerman here at Barclays. Just a couple -- one follow-up from me, if you did call out the late Easter in North America, how much lower than the 7.2%, would you think it would be ballpark. Are we taking up a couple of hundred bps for that, just to try and get an idea of the second half comments that you're making? And then secondly, just around France, your third biggest market, I don't think you mentioned it specifically in the statement. I was just wondering whether you could actually give us an outline; it's been a challenged market for some time. What the organic growth was in the first half in France, what's going on in the market in terms of market share?

And just finally, a bit of a longer-term question, just around kind of margins in NAFTA, which are clearly very low, loss-making in the first half, obviously there's phasing issues. There's a lot going on, Martin, in terms of CapEx and in terms of kind of logistics benefits you're talking about for 2020.

I was just wondering whether you can kind of just help us kind of think about what the underlying moving parts are around profitability in NAFTA looking into the back half of this year into next year. Maybe elaborate a little bit around the sort of phasing that you expect on that. That would be super.

If you carved out the Easter part, you would be at around 5% roughly. And your question about France, so we are growing low to mid-single-digit in France, which is also within our expectations. France is a tough market, as we all know, tough market, especially from a price pressure point of view, all our competitors tend to -- or most of our competitors tend to be quite aggressive on price. We try not to be aggressive on price. We do not want to give more promotions. We do not want to bring all these prices down, despite the fact that there is a lot of pressure from the trade. Of course, we also in a period where you have low cocoa bean prices, you cannot completely ignore the pressure, you sometimes have to give in a bit. But in general, our price -- our prices have remained much more stable than the ones of our competitors. Of course, that has in some ways, almost implicitly like a price increase when others go down in price aggressively. And in this market, where it's really very challenging, I think, growth of mid- -- of low to mid-single digits is what we have to expect, what we also communicate to the outside always that, that's where we think we will land in France. And I think it's a positive result in France.

We should also bear in mind, Germany, you didn't ask this question, but that's the biggest market in Europe. We have continued good growth there. I think our strategy to really grow penetration with Lindor in Germany is working very successfully. We are really pleased in Europe with the 5% growth. And of course, it's a portfolio, where you have different companies, some are more the top line drivers, some are more the bottom line drivers, the cash cows and France is probably more from the second group. And then you asked about the U.S., we may have -- you may have to elaborate a bit more on this question. I'm just answering how I understood it, and then you have to maybe a follow-up question. I think I heard the word CapEx in your question. So of course, there is a lot of CapEx, mainly driven by the fact that a lot of the growth, even the one in the U.S. is coming from volume.

We have communicated about 1 year ago that we plan to build out a New Hampshire factory, which is the Lindt factory. In the U.S., we have a total of 6 factories in the U.S. 4 for Russell Stover, 1 for Ghirardelli and 1 for Lindt. And the Lindt and Ghirardelli one, I mean the one in New Hampshire is actually producing also Ghirardelli products. So it's a shared factory, so we are building it out to be ready for future needs coming from the growth of those 2 brands. And it's a program that will go over the next 3 to 4 years. It's a big project to build out that factory and be able to produce more liquor, more chocolate mass and also more molding capacity, Lindor, et cetera, et cetera. So that part, I guess, I understood that question correctly.

Yes. I mean you did, very useful. I was just -- actually, more specifically, just looking at the NAFTA margins, which have been down for 4 consecutive years and down further in the first half. It sounds like it will be down again in '19 on '18, but then a big up in '20? Just trying to get an idea of at what point do NAFTA margins trough?

I mean you know why it has come down in the last year. We have lost our volume, and you cannot produce the fixed costs with the same pace. The cost savings initiatives that we have initiated. The big one is logistics. And if you change the logistics network in the way how we changed it with 5 new warehouses, et cetera, et cetera. It takes time to kick in -- the savings to kick in. I think I already said in March that it will kick in from 2020. But from some of the other initiatives like procurement and merchandising, we have already benefits. So for the full year, I'm expecting a slight increase in the EBIT margin compared to last year. And as I said in the call before, we have also reinvested money from the lower cocoa bean price in marketing. So we have -- we have continuously high marketing investments in the U.S. as well, so that's also a part of -- it's an important stone of the parcel, right?

Sure. I don't know whether I can maybe just squeeze one more in, just around your net financial position, Martin, obviously that increase is primarily related to the IFRS 16 adjustment on the net debt. I mean you've told us that you almost finished the share buyback, there's a little bit more to go, but pretty much there. Should we expect, given the underlying strength in the net debt excluding IFRS, you said 2, something [2.50] but it would be a reasonable assumption to assume a further ongoing GBP 500 million buyback?

Nothing has been decided. Nothing is planned right now. We have to see to evaluate this. I mean we also should bear in mind next year, we have to repay CHF 500 million from the bond in October 2020. So we are assessing the situation, and we have not made any decisions.

The first one would be please on industry pricing. Can you share us on your thoughts what you expect would be the industry price increases in North America, Europe and the Rest of the World in the market the next 12 months? Second question would be, please, with the potential price increase in Ghana of market price, plus $400. Are you rethinking about your sourcing, sourcing more from other regions. And if not, when would you start to execute on the price increases here and how sort of, in general, do you see that this extra charge of $400 is implemented. And the last question, price specific, your chocolate cream, you introduced a couple of quarters ago. Can you tell us how it's doing? And if this can be a good revenue potential for the future? And if yes, how much roughly?

Okay. Industry pricing you asked by segment, it's really difficult because it's impossible to know what the competitors will do, what I heard and I think you wrote this really in one of your reports that Mars is increasing somewhere between 8% and 10%. It's always a question, of course, 8% to 10% can be the list price. It doesn't mean that net-net price also goes up 8% to 10%. It depends what they do with the promotions. But that's what I heard, 8% to 10% in March. I doubt that for the U.S., in general, it will be 8% to 10%, so it's a tough one. We have not decided what we will do yet. I mean we have just done a price increase in the first quarter. But we may, of course, reconsider another one depending on your second question, right, which you can talk about that later, what will happen is that cocoa market. And Europe, Europe is a mixed bag, right?

You have some markets in Europe, which are affected by very volatile currencies like Russia, there, a lot of the -- you do constantly price increases, basically, depending on the currency, right? And then you have the more stable markets, which are related to the euro. There it's a bit more difficult. And I talked about France before. In France, it's very difficult to do price increases. Many of other markets, right, a bit easier. But in Europe, I would not expect massive price increases right now, but we have to see what happens. And then Rest of the World is a bit a similar story as Russia where you are -- I mean, first of all, you're already quite high.

As you can also see our profitability in the Rest of the World. We have relatively high prices in those markets. So we have a relatively strong position. Our brand has a strong position to do price increases also if we needed to, and because those markets are so volatile currencies, it's also a bit more use, more normal, let's say, to do price increases than in markets in Europe, where you have to negotiate for a long time with the trade. So they accept it, right? Because you should remember that we cannot just do price increases that we wish in Europe, we always you have to negotiate it with trade. And oftentimes, they don't want to accept it, so that's a bit easier in Rest of the World. And yes, that definitely depends on the currency. So I cannot give you a number now.

I think in the U.S., you will probably see the fastest price increases followed probably by Europe, to some extent, depending as well what happens with the chocolate mass and chocolate liquor. I mean we are producing it ourselves. So it's a bit -- we control a bigger part of the value chain ourselves.

So your question about Ghana. Bear in mind that Ghana and Ivory Coast account for 2/3 of the cocoa market worldwide. So basically, with our market share, you cannot -- it's very difficult not to source from Ghana. I mean it's a good market for us, good quality, we have our sustainability programs there. So there's no intention not to source from Ghana. We want to continue to source from Ghana.

We also source from 4 other origins. So it's not -- you just buy from Ghana. We also source from Ecuador, from Dominican Republic, from Papa New Guinea, from Madagascar, et cetera.

And over the next many years, I think we will diversify further. The more we grow, the more we will diversify the origins. That's sure. But for now, let's say, for the next few years for sure Ghana will remain important, and also in the future after that. So how certain is it that they will implement it, it seems certain. I mean it's from the 2020, 2021 crop. So it's from October 2020. It's not in effect yet. But from what I know, from what I read, from what I heard from our people on the ground, it seems they will implement this $400. Now you should bear mind that 1 ton of cocoa, the cost of 1 ton of cocoa is the future market plus, let's say, the normal differential. Last is living income differential. So what we don't know is what will happen if the normal differential, which is also about $400, right? So 1 ton of cocoa net cost is actually -- if the market is [CHF 2,500], it's [CHF 2,500-plus]. The Living income differential plus the normal differential, so it brings you to CHF 3,300, so it could also be that the other differential will come under pressure. We don't know that yet. So it's too early days because we are not really buying 2020, 2021 crop yet.

But I think the conclusion here is any way that the cocoa beans, and also the cocoa butter will get more expensive, will become more expensive. That's a good question. The big question is a bit, how much more expensive. And I think with a brand like Lindt, we have possibility to increase prices in general, more than a more mainstream brand, right, because we have put a lot of money behind our advertising, and that gives us a little bit more I would say, a bit more power to increase prices with the consumer, with the trade. The trade, It's the same, right? It's always tough. But I think the consumer expects the price increase from us a bit more and our elasticity is a little bit lower than with the mainstream brand.

And then your last question was about the chocolate spread, we have launched it mainly in Switzerland and some other small markets globally on retailers and in all our retail stores. In retail, it works really well. It's one of the top 10 selling products. I would still say it's a niche product because we have to see, it's much more expensive than if you take some of the competition-- competitors' products, so we have to see. But so far, so good.

Jon Cox, Kepler Cheuvreux, here. A couple of questions for you. Just going back to Patrik's question about the operating margin and the impact of IFRS 16. So you were saying that on an underlying basis, your margin expansion was just 10 basis points in H1. I wanted to just get a clarification, that was a quite case as to the first question. Then just going back to the margin question. Obviously, your North American EBIT margin, not long ago, was around 13%. Just wondering how we should think about if and when you would get back to there? And also what would this mean for maybe the Rest of the World and Europe, where potentially you may be overruns a little bit in terms of profitability, in the last few years? And would you now start to reinvest again in the Rest of the World and Europe. So you'd actually see a margin decline, there may be offsetting the improvement in the U.S. or North America, to keep to that total 20 to 40 basis points margin expansion? Or is there a chance we may even see an acceleration of margin expansion on a group-wide basis over the next couple of years as North America sort of finally recovers, and everything seems to be moving along pretty well there.

Third question then just on the buyback, you said the buyback will be completed by the end of the month. That gives you a week, you still have CHF 45 million to go, nothing I can see so far on the second trading lines today. Do you still think it's realistic to finish that program by the end of this week or do you think, actually, maybe it will go into maybe August or September? And then just a last one on Russell Stover. You talk about the Bowline doing well. Just -- maybe you could just tell me, I thought it was a copper box, which was launched earlier this year, and it's been doing quite well? Or is the copper box part of the Bowline range? I'm just trying to --I get a bit confused with all the different ranges and all the things you're doing at Russell Stover. Just a bit of a clarification on that Bowline. Maybe you can just say, I know the box chocolate is a relatively big proportion of revenue. You can give us a rough idea? And then how much is that Bowline of the box chocolate. And so you can just give something to our clients about -- in terms of the improvement in Russell Stover and here's an example.

All right. So I mean in no particular order, I will little jump around a bit. So buybacks, maybe it was misunderstood when, I think, I say completed. I mean at the end of July it is over, if we had bought back CHF 455 million or CHF 500 million, it's over, right, because we don't buy from August. That's how it has been set up. That's how it has been authorized as well. You always have to get together with the bank here. From the authorities, you need the go ahead as well. So it's -- we had the window until the end of July, so it will be finished, if we buy CHF 455 million or CHF 500 million. That doesn't make a difference. So at the moment, how things stand, I think it will end with CHF 455 million, which is 2.9% of the equity, so that's on that one. Then your second question was on the EBIT margin. Of course, yes, it's probably not where we want it to be last year. I think it was around 8%.

As I mentioned before, one question, it will -- we believe it will be better this year than last year for the full year. And when will it be back to 13%. Good question. Difficult to say, it always depends on many things, of course. I mean we see some positive impacts on logistics, as I mentioned, we will see some positive impacts from operating leverage. And then on the flip side, of course, it all depends a bit how much do we want to invest in the brand there--in the brands, I should say, we have 3 brands in the U.S. So that also needs some investment, of course, hypothetically, if the other 2 segments stayed flat. And if you want to grow 20 basis points per year, you need to grow about 80 basis points per year in the North America, roughly, right? Because it's about 40% of the business. It's even slightly less. It will be about 30 basis points. But that's just hypothetically, because we also think, in some of the other markets, we can make progress, right?

So look, we evaluate that. It's a bit of the different pieces each year. And then we have to decide where do we want to allocate the advertising money, et cetera. I think at the moment, it's important that a brand like Russell Stover, which has lost relevance over the last years, that we continue to put some money behind it, that we continue to put some innovation behind it and of course, that costs some money, but we are here for the long run. So we always said, in the long run, we are doing the right things. We are trying to think really in the long run not just the next 6 months. So yes, obviously investment in advertising has also some impact on the bottom line, for sure. So I cannot predict exactly by when we will be back to 13%. What we want to achieve internally. We want to make steps forward in the right direction, each and every year in North America. So I think this year, we should be able to make some progress versus last year.

And then your question about Russell Stover Bowline, yes, it's maybe a bit confusing. Bowline is kind of -- it's the core of Russell Stover. Somehow it's the core product. It was a white box before in different sizes. Now it's still white. The cover is still white, but on the side, it's copper, and we launched it like 3 months ago. This is really the big #1 line for Russell Stover. It's close to CHF 100 million in revenue. And you will see in the last quarter, mainly, how the consumer will take the relaunch. We have seen some positive signs already, but in the last quarter, it is really most of that product is sold. And yes, it's -- the second big innovation in the last 2 years has been the sugar-free range, as you know, and they're -- the relaunch worked, and we are positive there.

We have prelaunched now actually also some bars of sugar-free from Russell Stover chocolate bars, that's the latest innovation. And yes, as I said in the last couple of years, we are really going through this whole product portfolio, line item by line item. What we have not relaunched yet is Whitman’s, which is another brand, which is also boxed chocolate. That's still the same box, we have not relaunched that one. But apart from that, we have really touched most of the product side. We have taken some out of the portfolio or we have worked on the packaging. We have worked on the content and the recipes, et cetera, over the last 4 years. I hope that the...

Yes. No, definitely, it's been really helpful. On the everyday range. The bags with the sort of individual piece of the chocolate. That's still going and still going well. I think that was -- I know that was probably about 3 years ago, but at the time, you seemed to be quite satisfied with that. Is that still okay?

It's okay. You should bear in mind, strategically, the positioning of Russell Stover is around gifting and sharing. So I mean products tend to really be a bigger ones that are around the theme of gifting and sharing. I think those bags you could now say, okay, I buy a bag and I share it at home, but it's not 100% in line with gifting and sharing, so I think it's a tactical initiative. It's a good initiative, it's still out there. I think it will also remain out there. But it's more -- it's not one of the biggest study, as, I would say, of Russell Stover. It's an important run tactically, so we can also have some sales in the months where we don't have the seasons. But it's not like -- it's not a big portion of the sales. But it's okay.

... and we have to see during the year. It's always a bit of a question towards the end of the year, how much do we want to invest in advertising? And how much do you want to how -- it depends a bit on how the things look at towards the end of the year. So right now, the 20 to 40 basis points are including -- the guidance is including this impact. So you're basically asking me, if we get to 30 basis points, right? Indirectly. Then I cannot confirm that right now, the guidance is 20 to 40. And it's tough. It's tough to get to the 20 to 40 basis points. It's tough because there is a reason why Mars is increasing their price by 8% to 10%, as an example. I assume, logistics costs are high in the U.S., it's a fact. I mean there is a lot of inflation there. It's not just -- I mean then on top of that, we had this one-offs from our new network. It's tough.

Two from me as well, if that's okay. Can I please go back to the U.S. because 8% growth, circa 8% growth in the U.S. compares to about 1% in 2018 and a decline in 2017. Clearly, the market, albeit to your point, has accelerated very slightly, but it's nowhere near the 8% suggest -- 8% that you've recorded and the scanning data we have available to us, doesn't suggest that your growth would have been that high in H1.

Now is there some sort of sell-in versus sell-out difference that that we should be aware of? Or would you highlight particular channels where you've grown or any distribution benefits. Just to give a bit more context on the very high-performance in a relatively low growth market would be very helpful. And staying on NAFTA a second. I believe, from last year, Mexico is now included or reintroduced, I should say. What percentage of the division would Mexico be today? That's sort of my first question.

And then going on to Europe, I think you mentioned there has been a deceleration as another participant alluded to earlier in the call, early in the call, Switzerland has turned around quite nicely. What countries would you suggest have performed slightly less well compared to last year, that would be very helpful.

Okay. Thanks for the question. Maybe starting with the easiest one. Mexico, so it's really a small thing, but of course, we have big plans there. It's about 1% or so around 1% of NAFTA of sales. So it's relatively small. It's growing double digit, but of course, it still needs some time to get to a size where it has a big impact. So you also mentioned the 8%, around 8% growth in the U.S., why, I mean the markets, you're right. According to me, the last time I can remember, it was around 2% market growth in the U.S., last 52 weeks. Maybe 2.2% or so. And look, there are different reasons, right? I mean one, I always say, not all channels are covered in this (inaudible). That's an important one to bear in mind.

There are lot of channels, which are not -- I mean sure, our retail stores are not covered. E-commerce is not covered. A lot of club channels are not covered. You know that Costco, BJ's, et cetera. And then yes, some of the convenience stores, some of the grocery stores in the U.S. are not covered. So it's always difficult-- it's not really a 100% correlated, always, right? As you can see now as well. Now of course, then you also had the Easter impact, as I mentioned before. So the underlying growth, excluding Easter is not 8%, we should bear that in mind. That's why I'm also guiding for 4% to 5% for the full year. And then you will probably remember some of the logistics issues we had last year. And that also led to some restocking in the first quarter. I mean generally, our customers who just at the year-end, for example, they have a low inventory and then in the beginning of the year, they go again to a higher inventory. So sometimes, you have sort of the same impact, right? So this all destocking, restocking impact to some extent, can also be a reason.

So I would say it's those 3, right? So one, not all channels covered by [Nielsen], so it's not a 100% correlated, then Easter much later, and -- which is important for us in the U.S. with Russell Stover and Lindt, especially and then some destocking and restocking. And of course, then also some distribution gains. As usual, our sales forces are really trying to find not only find new customers, but also get more products on to more Walmart outlets or more [large] stores, right, as an example, well Target, et cetera, so it's probably those 4 things.

And then you asked me about which markets grew less than last year, that's also a good question. Canada grew double-digit last year. I mean it's not double-digit so far year-to-date. As an example, I mean still positive growth as per Nielsen, close to 5% growth in Canada. And then what else, maybe some European markets, but it's not really, in general, France is one, as we discussed before, it's still a tough market, France. You should bear in mind Switzerland grows faster, but Switzerland in total -- of total sales is not so big. So it doesn't -- I mean it's very pleasing to see that we are -- have a good result there, but it's not a huge percent of the total sales, right? In general, I would say, we are in similar territory as last year in most countries, it's not massively different. The big uptick is really from the U.S.

In the press release, you mentioned that you were particularly pleased with the Lindt U.S. brand development. I assume that's above 7.2% organic growth. Could you give here some examples of what has driven that? I mean was that Easter products? Was it Lindor? Or was it specific channels, specific clients? Then second question, I think you indicated in North America that you have increased marketing budgets probably over proportionally. Has that been the case in all regions? Or have you redirected marketing spending into North America? Because, I mean from the outside, one could draw that conclusion.

And then of course, the second question would be, why would you redirect marketing budgets from other regions to North America, when this is your lowest margin region. And then third question, just a small one. In the cash flow statement, you have quite a significant increase in provision, value adjustment and pension assets from CHF 20 million to close to CHF 40 million. Could you provide some detail on that one.

Okay. So let's start with the question in -- your question was about Lindt U.S., right? What drove the growth there? I mean again, I would like to bear in mind -- you should bear in mind that in the U.S., as I said in the beginning, the growth is coming from all the 3 brands. They grow in a similar -- at a similar pace. Now Lindt U.S., particularly for Lindt, the U.S. is really a Lindor market, so Lindor has a big portion of the sales share. So if Lindor works well, then in general, the Lindt U.S. business works well. And we have to -- we are really in the last years, we have started to focus even more on our core products within Lindor with the trade. So if you think about a display, secondary placement in a Target store, for example, we are more and more going into the direction where we really put mainly top sellers on this display, maybe 3 or 4 years ago, we have even put maybe 10 different products on a display as an example. Now we are focusing more on the top 2 or 3 sellers, for example, Lindor Mint, Lindor Assorted and then maybe one innovation, as an example.

And this strategy has really worked well in the last years, this strategy of more focus on the key products. So that's one of the key drivers. And then generalize, I think we are more or less playing the same channels as we have always played, like 2 or 3 years ago, you remember that the drop channel, especially came a bit under pressure. I mentioned Rite Aid before, which is under pressure, in my view, is struggling financially, and we are being cautious there, but then Walgreens and especially CVS, they took away some of the chocolate from the checkout points. But actually, when you do now store checks in the U.S., you will see that they have put it back, so at the checkout points you have, again, chocolate. So to some extent, this may also have helped, right?

So I think that the channel mix has not changed that dramatically. It's similar, of course, sometimes, you have a bit of a new customer or you're pushing for more distribution points, but no big change there.

Then you had the question about advertising funds, if we have redirected massively advertising funds into North America, but actually not the case. We are, of course, benefiting from some lower raw material prices. We have been able to continue to invest behind our brand, and we are doing that also in Europe, we are doing that also in the Rest of the World. It's also important in Rest of the World, if you think about the market in overseas. In China, for example, this is more digital there. Of course, less TV advertising, but it's also very important in those markets to invest money. And so the answer is no basically, good question there, if we are now just investing the bulk of the money in North America.

And then your question around the cash flow statement, this is basically coming from higher provisions for pension liabilities due to the lower interest rates. Okay.

Martin, just a few follow-ups for me, please. The first is on the retail expansion. Could you give us how many stores you've opened in the first half relative to the 25 target you gave for the full year? And then the second question is on the Easter impact, you gave it for NAFTA. I just wondered if you could give it for Europe as well. How much of the European growth was impacted by Easter timing? And then I have a third question on working capital.

You talked about higher raw material cost expectations going into the second half of the year. I just wondered if you could give us some guidance on what impact that's likely to have when it comes to working capital outflows. And then a quick one on NAFTA margins. I wondered if you could help quantify the magnitude of the logistic headwinds you're expecting this year in 2019?

Okay. In terms of the first question. So how many stores have we opened in the first half, it's about 10 and as I mentioned, that's net, right? Because sometimes you close a couple of and you open. So that's the net number. So that's -- and for the full year, we said about 25, right? Still 15 to come for the second half.

Then Easter, how much is Europe impact. The impact is less in Europe than in the U.S. That is always depending on the -- I should say, the shipping pattern because the U.S. is such a big country, you tend to deliver earlier, Easter earlier, right? In Europe, most of Easter is always delivered in the calendar year, which -- in which the Easter is happening, right? So if it's earlier rate, you don't tend to ship in quarter 4. But because the U.S. is such a big country, you fly from East to West Coast 7 hours, you really start to deliver to your customers early. And if Easter is early, it means that you deliver more in quarter 4 of the year before, right, than in the [year where] it's late. So that's one impact.

And the second impact is just -- if you have more weeks to sell, right? I mean you have 2 impacts of a late Easter, right? You have more weeks to sell, but in the U.S., particularly, you also may have a shift of sales between quarter 4 and quarter 1, right? So you have those 2 impacts. And I would say, in general, the shift of, let's say, do you have more weeks to sell, again, depends heavily on the climate, right? So it's really difficult to know exactly how much you have an impact. In Europe, I would say, in general, no big impact. So it's really mainly in the U.S.

Then raw materials, your question was about working capital outflows in the second half. I would have to check that. I cannot tell you on top of my head now. What I can tell you is, overall, on the P&L overall, material costs will be slightly below or at the same level as last year, right, for the full year as a percent of sales. So that's why second half, it will be a bit higher than this in the first half, but we are historically at the low level. So it's still -- we will have a relatively good second half on this one as well.

And then logistics headwinds, so no, we don't quantify one-offs because we don't want to find excuses for not hitting our EBIT margin or something like that, so we tend not to quantify it, we don't show EBIT as EBIT before logistics and EBIT after logistics impact, et cetera. We just have one EBIT number. And that's why we don't quantify this impact and we don't quantify either right now, what the positive impact will be next year. But definitely, the biggest impact negatively was last year when we opened the 5 warehouses when we had -- when we had extra one-off costs, therefore, and we had -- when we had headwinds.

This year, the headwinds continue with inflation. Logistics is expensive in the U.S., it's getting even more expensive and we are still also in the middle of this new network organization, closing the old warehouses, but also in '19, to some extent, we still have extra cost because of that because we still have some excess capacity, which we are subletting, which we are selling, et cetera, et cetera.

I had 2, but the first one was on the difference between late and Easter latest season, so your answer has been very, very clear.

So my second question is much more a question of clarification around the growth in the North American market because if I understand well, during your prepared remarks, you said that all 3 U.S. brands grew at the same pace. And in the press release, you are specifically mentioning the Lindt U.S., so is it possible to have a better view and are reselling -- Ghirardelli and Lindt's growing all in the range of 5% to 7%? Or is there a clear difference between Lindt's and the 2 other brands.

There's no big difference. So it's really -- they are all in a similar -- around the same level, where you have to -- the overall U.S., then you have a bit of a positive impact. This is one-off from Easter, which Russell Stover is benefiting most because the Easter season is the biggest, but there is no massive difference between the 3.

Okay. If there are no more questions, I would like to thank everybody for your time. I think it was a very interesting discussion. There were very good questions. Thanks for everybody who asked the questions. And if you have further questions, please don't hesitate to contact either me or [Susanna] directly. Again, and we are happy to answer any follow-up questions. Thanks a lot for your time, and have a great day.